Greece Outside In

Sunday, November 25, 2012

Greek police recover antiquities

Greek police recover all the antiquities stolen from a museum in Olympia in a robbery which raised concerns about cuts to museum security.

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The Greek Resistance

The Greek Resistance - Al Jazeera
Business Insider
Greece – it is where Europe's civilisation and the very idea of democracy began. But today the country is in crisis; a crisis that may well destroy the dream of a unified Europe. A dream born out of the nightmare of World War II, a dream to unite ...

and more »

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EU, IMF working on Greek debt compromise

Greek Reporter

EU, IMF working on Greek debt compromise
The Nation
ATHENS - The EU and the International Monetary Fund are working on a compromise to break deadlock on Greece's debt mountain which has held up the latest rescue loans, a Greek finance ministry source said on Friday. The European Union and IMF, ...
Greek Bailouts Cost Some, Gain OthersGreek Reporter
Eurozone continues with talks on reducing Greek debtKathimerini
Glimmer of Greek hopeReuters Blogs (blog)
Financial Times -Irish Times -International Business Times
all 67 news articles »

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A writedown might stop the vultures feasting on Greece

The world desperately needs a better way of coping with countries that owe more than they could ever repay

When the frigate Libertad berthed in Ghana's Tema harbour last month, it was meant to be a brief stop; but the Argentinian navy's tall ship has been impounded there ever since, part of the spoils in a round-the-world battle to force Buenos Aires to atone for defaulting on its debts more than a decade ago.

As eurozone ministers prepare for yet another painful negotiation about how to prevent Greece plunging into its own catastrophic default, the fate of the Libertad – and a controversial US court judgment last week in favour of the vulture funds pursuing Argentina – is a reminder that the world desperately needs a better way of coping with countries that owe more than they could ever repay.

More than a decade after it suspended repayments on more than $90bn (£60bn) of debt, and long after its economy began to emerge from deep financial crisis, Argentina is locked in a seemingly intractable row with the "holdouts", as they are known, about how much is owed to them.

Vulture funds, which specialise in buying up the debts of countries already in distress at a fraction of their face value, when most investors have given up on being repaid, are actively pursuing Buenos Aires through the legal systems of scores of countries.

In a decision that sent shock waves through financial markets, a New York circuit judge ruled last week that even the banks handling Argentina's repayments to other bondholders would be "in active concert" with the country if they fail to co-operate in ensuring that the vultures – in this case, Elliott Capital Management – have their feast.

After years of negotiations, over 90% of creditors signed up to two separate deals, in 2005 and 2010, which wiped out 70% of the value of the unpayable debts but at least meant some repayments would be made.

But unlike in, for example, a corporate takeover, when the votes of a majority of equity holders can bind the rest, or a bankruptcy, where the law in the firm's home country governs which creditors get what, and who is first in the queue, there is no agreed process for sovereign default.

Some countries have used "collective action clauses" when they have issued new debts to make restructuring easier.

But despite the wrenching social and economic crises that have repeatedly ensued when countries plunge too deep into debt, there is no internationally agreed way of settling the competing claims of investors and creditors. And as last week's shenanigans showed, a mini-industry has developed in buying up debts and trying to squeeze defaulting governments for whatever they have left.

Bondholders, including the vulture funds themselves, insist that offering debt relief on any significant scale generates "moral hazard" – the risk that borrowers are encouraged to take on reckless debts in the assumption they will be let off the hook in the end.

But the reason ratings agencies make a very healthy living from assessing the riskiness of sovereign bonds is that the interest rates paid by governments are meant to compensate investors for the possibility that they may not get all their money back.

Spendthrift rulers and the voters who hand them power are culpable, of course; but so are speculative investors who hope to make a quick buck by riding on a booming country's growth.

And once an economy has been plunged into crisis, with borrowing costs spiralling as creditors dump its debts, putting it back on its feet by cutting debts to a genuinely manageable level can offer the best prospect of anyone getting any money back at all.

That principle has repeatedly been accepted for the world's poorest countries, through HIPC, the heavily indebted poor countries regime, overseen by the World Bank. It can still be a fraught process, requiring countries to jump through policy hoops, but it does at least involve an independent assessment of how much a country can afford to repay without being sentenced to decades of running to stand still.

Even Charles Dallara, the outgoing head of the Institute of International Finance, the US-based body that has negotiated hard on behalf of holders of Greece's bonds, has argued that some kind of managed restructuring – including a writedown of debts – might actually help the country get back on its feet properly. In other words, Greece needs much more radical debt relief than its eurozone neighbours have so far been willing to offer.

Yet again last week, the eurozone and the International Monetary Fund failed to break the deadlock over releasing the latest tranche of Greece's desperately needed bailout, despite the coalition leader, Antonis Samaras, having guided another monumentally unpopular set of austerity measures through the country's parliament, as its creditors had demanded.

The fate of the Libertad, which the vulture funds would like to seize as a prize, remains unresolved – as does the future of the millions of Greeks struggling to manage in a collapsing economy as its government battles to afford the repayments to its eurozone partners.

Drawing up an agreed international process for managing sovereign default would be a fraught diplomatic exercise; but it must be better than years of social and economic chaos, as bullying bondholders seek to impose their will through the courts – and on the high seas.

Heather Stewart

READ THE ORIGINAL POST AT www.guardian.co.uk

Hewlett-Packard guilty of being blind to bigger picture about Autonomy

Whatever the rights and wrongs of the Autonomy case, the US firm clearly ignored widespread scepticism about the deal in its rush to get into software

Blame Mike Lynch. Blame Deloitte, Autonomy's auditors. Blame the investment banking advisers. Blame Hewlett-Packard itself. All those conclusions have been advanced this week after HP wrote off the colossal sum of $8.8bn (£5.5bn) against its $11bn purchase a year ago of software firm Autonomy.

So who is to blame? Well, Lynch and Deloitte are innocent until proven guilty, and we (as well as the US Securities and Exchange Commission and the Serious Fraud Office) will have to wait to see what HP offers as hard evidence to support its claim that there was a deliberate attempt to inflate Autonomy's financial performance. Lynch denies all the allegations and, at the moment, this electric tale is stuck in the territory of claim and counterclaim.

For what it's worth, Lynch does himself no favours when he complains that HP managed the firm he founded in 1996 in a cack-handed manner. The US acquirer may well have been incompetent, but that's a separate issue. This is an argument about the accuracy of Autonomy's accounts. That's a dispute about facts – and if HP has sound evidence, Deloitte is in deep trouble.

Yet one can still say that HP was monumentally silly to pay $11bn for Autonomy on the basis of what appears to have been a bog-standard inspection of the goods and a couple of "fair value" opinions from banking advisers Barclays Capital and Perella Weinberg. HP's chief executive Meg Whitman, as she attempted to explain why the alleged improprieties had not been discovered during pre-acquisition scrutiny, replied: "In the end, you have to rely on audited financials and we did."

Rubbish. HP did not have to rely solely on the audited financials. It could have crawled over contracts, interrogated Autonomy's customers and suppliers and dug as deep as it wished. There was every reason to do so, since respected analysts had been prodding Autonomy's accounts for years and making unflattering comments. In the world of software, what constitutes a sale is always a contentious issue. Anybody paying $11bn for a company with an annual turnover of $870m had a duty to their shareholders to satisfy themselves that they knew precisely what the composition of Autonomy's sales were and when revenues were recognised.

Indeed, HP had a double duty given its appalling acquisition record. The US company has had a reverse Midas touch for years, incurring heavy write-offs against its purchases of Electronic Data Systems and Palm.

The acquisition of Autonomy was part of a last-gasp attempt by then chief executive Léo Apotheker to reinvent HP as a broadly based technology company with a bigger software presence, instead of a boring old computer maker. It looks as if Apotheker and the HP board were bewitched by the idea of Autonomy as a sexy software outfit that could rebrand their company as a "growth" stock, as opposed to a business stuck in its PC past.

Whether or not Autonomy's management was engaged in a "wilful attempt" to mislead, HP's top folk appear to have been wilfully deaf to the sceptical views about Autonomy. That's unforgivable. Larry Ellison at Oracle – nobody's fool – was screaming that the purchase price was "absurdly high" so, in effect, HP's directors were staking their reputations that they knew better. Apotheker has departed (with a hefty payoff) but several of the survivors on the HP board will surely have to follow.

Autonomy was always a baffling company for non-tech outsiders to understand. Bayes's theorem didn't succeed in proving the existence of God in the 18th century but apparently the mathematics behind it was perfect in the 21st for making sense of so-called "unstructured" data. Don't worry about the details of how the software works: just remember that God helps those who help themselves – and HP didn't.

Only Osborne's credit is at stake from loss of triple-A status

Britain held onto its cherished AAA credit rating through the winter of discontent, Black Wednesday and the credit crunch, when a fair chunk of the financial sector was in such a dire state it had to be nationalised. But as the economy continues to underachieve, depressing tax revenues, and with George Osborne highly likely to have to ditch one of his two fiscal rules at the autumn statement, analysts at HSBC have predicted a downgrade may be on the cards.

For Osborne, that would be a political catastrophe: he has staked his reputation not only on tackling the deficit, but on keeping the nation safe from the turmoil on the world's financial markets. Stick with me, the chancellor's message has been, or the ratings agencies will lose confidence in us.

While Osborne's reputation would be in tatters, however, HSBC's view is that the impact for the economy would be relatively slight. They suggest the gilt market would "largely shrug off" a one-notch downgrade. As they point out, ratings are partly relative: investors with money to lend will tuck it away somewhere, and with the fiscal cliff looming and the euro crisis far from over, the UK hardly looks like the riskiest place. It also has the advantage – unlike Greece – of being able to issue its own currency: it is a "true sovereign", as they put it. Certainly, the US downgrade, though it rocked the equity markets, had little impact on its bond yields.

The one impact HSBC does expect from the loss of our cherished AAA status – apart from the dent to Osborne's pride – is that sterling would be likely to slide. But with net trade so far failing to make the positive impact on growth the coalition had hoped for, a weaker pound would hardly be a disaster. Indeed, Sir Mervyn King has acknowledged that the strengthening currency is one of the risks to the economy's performance in the coming months. So as Moody's prepares to issue its verdict on the UK's rating next year, perhaps the only person who should be panicking is the chancellor.

Lonely supermarkets this Christmas

Tesco launched a Christmas charity appeal last week. Not to get shoppers through its doors, but for customers to donate tinned food and other groceries to needy families. However, it is shaping up to be a tough festive season for consumers and retailers alike as the ghosts of Christmasses past – such as high food and energy prices – return to haunt the checkouts. Nowhere will that be more apparent than on Christmas Day itself, after this year's run of bad weather conspired to devastate crops of brussels sprouts, parsnips and potatoes, triggering price increases and a scrabble to import. The recent monthly industry snapshot from Nielsen painted a picture of subdued spending as Britons hold back despite a barrage of advertising;, money off coupons and promotions from the majors in the last week of October alone, Nielsen says, Waitrose spent £750,000 on a TV ad blitz while Tesco lashed out just shy of £2m across TV and print. They'll have to hope shoppers feel like treating themselves, as well as helping their needier neighbours.